Simple Ways to Make the Most of Your Income

Last week I shared some ways to becoming a millionaire and I’ll hit that topic from a few different angles in the coming weeks. This week, I want to give you some simple ways to make the most of the income you already bring in, because if you can cut your expenses, it is pretty much the same thing as getting a pay raise. Here are five ways to cut those expenses and resources that will help you maximize your income.

Look at Your Paycheck

I am privileged to see pay statements for lots of those folks I counsel. As we’re reviewing the pay information, I always check to see what things are being taken out before the net (take-home) pay. There are the usual suspects: federal and state taxes, health insurance, 401k, etc. But every now and then there’s something crazy in there. I’ve seen everything from allowing the IRS to withhold an extra $500 per payday so you’ll get a big tax refund (which is a bad plan, by the way) to withholdings for some random, unclaimed benefit that the employee didn’t even know he/she had and didn’t want. That’s money down the drain. As obvious as it may sound, look over your most recent paycheck stub and make sure you’re not giving away any money you shouldn’t. If you can’t understand everything on there, visit HR and ask them to explain it.

Be Willing to Change

This is a biggie! There is very little about personal finance that has to do with complicated math. I get asked all the time why I don’t use a calculator when I counsel folks and my answer is that the math MUST remain simple for you to be willing to do it. If you can do 3rd grade math, you’ve got the math part covered. The key to success is your willingness to change your behavior. Are you willing to change a habit if it will better you? Are you willing to admit you’ve made some bad choices and start making better ones? All of us struggle with this, but if you’ll be willing to change, you’ll be ready to win!

Look at EVERY Expense

With a willingness to change, now it is time to sit down and look at your checkbook and bills and review EVERY EXPENSE. Even if it is just the power bill – look at it! Are you spending money that you could use somewhere else more effectively? Britni Ross from Our Eventual Homestead just released a great little eBook called “Grow It, Build It, Save It!” that will really get you thinking about ways to cut unnecessary expenses (Note: the book is $0.99 right now, but she told me she’s going to run it for FREE on Amazon March 4-6!). It is short, to-the-point and is a great resource to get you thinking in the right direction on this.

Prioritize

What really matters to you? I’ve heard many pastors say they can look at your checkbook and answer that question and they’re right – we spend our money and our time on what is important to us. If you want to make the most of each day, set a schedule and stick to it. If you want to save money and maximize what income is coming in, spend a little time prioritizing your money (it’s called budgeting) and stick to it. You are in charge – make sure your money knows it. Need some help with budgeting and getting your financial house in order? Let me make a shameless plug for my book, “From Debtor to Better.”

Be Smart About Savings

If you’re not saving anything now, START! Don’t wait – do it now! Then once you start looking at where to put some of that money back for later, don’t be lazy! I’m consistently surprised that most people who complain they aren’t making any money in their savings/investments can’t tell me what they’re investing in, what their savings goals are, when they plan to retire, how much they need to retire, or a myriad of other pretty important questions that must be addressed if you want to be smart about what you do with your savings. Think about it – is it worth a few hours of your life to learn these things and develop a plan? It could literally be worth thousands, tens of thousands, or even hundreds of thousands of dollars. Figure out a plan for saving and then do it!

Okay – your turn. What are some tips you’d share to help others make the most of their income?

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About Barry

Barry is the husband half of the Humorous Homemaking team. He speaks and writes about personal finance issues, helping people get out of debt, live on a budget and make the most of every cent that comes into their hands. He is the author of From Debtor to Better: The Details of Debt and How to Get Out! and regularly speaks at conferences and other events.

Comment Policy: I love reading your thoughts and input on what you read here. I'm sure we'll disagree sometimes and that's okay! In those cases, do what's right for you and yours. As with any form of communication, only post comments that move the discussion in a positive direction.

Comments

This is VERY dependent on too many things for me to make a safe comment. Within reason, there is no limit to what you can put on your W4 to increase/decrease your withholdings, but there are too many variables involved for me to tell you exactly what is good for you. To start, bump it up by one or two more and see what happens. How’s that for scientific? HA!

I’ve been reading through the comments and am wondering about the tax deductions. I have a family of 4, including myself, how many deductions should I put on my w2 to get the most back each pay without having to pay in. I enjoy my big refund, but I think it would be better to stay current than to play catchup in March.

I wish I could answer this for you but it is DRAMATICALLY different for every family. If you look at your current W2 vs. how much you got back, you can increase the dependents by 1 or 2 and see the effect, giving you an ESTIMATE of what will happen, but every situation is too complex to be able to tell you the perfect number. Sorry. 🙁

I agree Barry. Every time I make the money go farther by spending less on groceries, cheaper utility bill, changing plan to save on my cell phone, something i need at a garage sale, etc. it gets me all excited. Then I look for something else to cut on. It adds up believe me and it is so fun.

Love this. Believe me, every couple weeks I sit down and pour over receipts and wonder where some of my money went. I need to get a new cell phone soon, which will require an upgrade or a new contract, so I’m trying to find a way to cut back other monthly expenses so I don’t have to cut into my savings goals. I’m looking square at the ever-growing cable bill and will be working on my BF to get that cut down or cut out completely 🙂

Make sure you investigate some of the prepaid cell plans before you decide to renew your cellphone contract. My husband and I recently switched to Straight Talk from Walmart, and for less than what we were paying before for just one of our phone bills, we now have two smartphones with unlimited talk, text and internet. I know Verizon and T-Mobile both have their own prepaid plans too, and other companies have them.

The catch is that you have to pay for the phone out of pocket, but we were able to find a really nice smartphone for $150 – worth taking that money out of our savings when we know we can pay it back in a matter of weeks with the money we’re saving by switching our phone plan.

I second (or third) the prepaid idea. We bought unlocked Verizon phones on Amazon and use them with Page Plus, where $39.95 a month gets you unlimited talk/text and 200MB of data. They run on the Verizon network, so you get the same coverage as Verizon without the big bill.

To cut the cable bill check out devices like Roku. It costs $50-100 upfront for the device but you can stream Amazon, Hulu, Netflix, etc. Now I only pay amount $15/month for more programming than I know what to do with. For some series that aren’t on Hulu and I don’t want to wait for I just pay for them on Amazon but it costs me probably $50/year to add True Blood, Mad Men, Walking Dead, and Dexter to my already long list of options. I don’t even miss cable.

Saving is always hard. Changing habits – especially bad ones – is even harder. I found a really cool table on Pinterest that encourages you to save money weekly. It’s a 52-week plan and the amount you save corresponds with the number of that week (week 1 – $1, week 2 – $2, etc.) By the end of the 52 weeks you’ve saved almost $1,300. It’s not huge by most standards, but the most important part of the plan is to have someplace to start.

I also save ALL my loose change and once a month I take the time to roll it (why pay a machine to do it for me) and end up with anywhere from $25-30/month that goes into a Christmas club. This is two-fold: It saves money in a specific account for a specific purpose (controls over-spending for the holidays, too) and it forces me to use more cash and not be so reliant on my debit card or worse, credit cards (which we only use on very rare occasions).

Thanks for sharing these comments. You’re right – it is all about simple choices and changing your habits. Sometimes it is hard (okay, most of the time) but once you see it is worth it you rarely go back to your old ways. As I commented to another person this morning – the key is to take small, simple, purposeful steps.

Thanks to your encouragement, I opened a savings account last month for the first time in my life. I now have $550.00 in my savings account, in just one month. We are cutting out our cell phones contracts with Verizon to help cut our bills. We were paying $220.00, but now we are down to $109.00. I will drop another line this week and reduce the bill further. We are forcing our children to pay their own “prepay” bills so they will understand that talking and txting is costly.

The short answer is that getting a big tax refund USUALLY means you paid way too much to the government throughout the year and they’re just giving you some of it back. I wrote a bit about it not too long ago on my other website: http://www.debtortobetter.com/common-sense-taxes-maximize-your-tax-refund/. That being said, that same article discusses that you should try to make the most of every credit and deduction without doing things JUST to get a big refund.

Misty, there’s a few reasons why a big tax return at the end of the year is a bad idea. #1, it’s a interest free loan to the government. #2, if you’re paying interest on any debt, it’s better to get that money now and pay it off quicker instead of that money building interest free. #3, when you get a big refund, you’re more likely to splurge with it than pay off debt or make good decisions with it. #4, if you’re using credit cards at all to make day to day purchases on needs, and have extra going in tax withholdings that you’ll get at the end of the year, you’re just wasting money in interest.

The main point is debt and interest. The government will do anything they can to make holding on to your money sound like a good idea, but I don’t trust them to take care of it while my family could use an extra $100+/month in groceries or gas, especially when I can’t trust myself with a large lump sum at the beginning of the year. It’s too easy to want to buy a big TV or splurge on a vacation when we could use that money for little things we need throughout the year.

Another suggestion is – instead of taking more out in your paycheck, put that amount in a savings account automatically. That’s what I do and I have so much of it for Christmas and some for long-term emergencies and other goals… that way I have the $$ without Uncle Sam borrowing it.

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